Bipartisan support for 40% health care tax repeal

nfib-logoBy NFIB,

Democrats and Republicans are coming together on a repeal of perhaps the unlikeliest of matters: a portion of the Affordable Care Act.

The repeal centers around a 40 percent tax set to go in effect in 2018. The tax is often referred to as the “Cadillac tax” because it would apply to policies that cost more than $10,200 annually for an individual or $27,500 annually for family coverage. As the National Journal reports, the tax is expected to raise $87 billion over 10 years to finance the nationwide expansion of healthcare coverage.

The tax would, in theory, drive down healthcare costs by encouraging employers to avoid pricier plans. However, small businesses typically pay upward of 18 percent more than others for health insurance. The tax is indexed for general inflation (not healthcare costs) so, as healthcare costs continue to rise, more people will be forced to pay this tax each year.

Both sides of the aisle agree the tax would be bad for business. Two bills have been introduced in the House this year to repeal the tax. That includes a Democratic bill that has 87 sponsors and a Republican bill that has 41 sponsors, which means a repeal is “well on its way to a majority,” according to the National Journal.

“Large corporations have been preparing for the Cadillac tax for years, spending considerable time and resources to help alleviate and plan for the excise tax,” says NFIB Vice President of Public Policy Amanda Austin. “Small business owners do not have the time or resources to prepare for and plan around the excise tax that will begin in 2018. Yet, small business owners are the population that may be impacted the greatest by the Cadillac tax, both from a cost and a compliance perspective.”

Regardless of the action being taken in Congress, businesses are already preparing for the worst. According to the International Foundation of Employee Benefit Plans, more than 10 percent of companies have already adopted changes to avoid the tax, 21 percent are working on changes and another 28 percent plan to act before 2018.

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